\nPractical point - The 45-day deadline<\/p>\n
It is not always easy to determine the exact date of cessation of payments before the court ruling. If the director hesitates, the prudent rule is to file for bankruptcy as soon as it is clear that the company has ceased payments. Delaying exposes you to personal liability; acting quickly protects you.<\/p>\n<\/aside>\n
Summons by a creditor<\/h3>\n An unpaid creditor may take the debtor to court for compulsory liquidation. The creditor must demonstrate the existence of a claim that is certain, liquid and due, as well as the cessation of payments. The court itself checks whether recovery is manifestly impossible before ordering liquidation - it may open a judicial recovery procedure if conditions allow. A creditor cannot therefore impose liquidation at any price: it is the court that decides.<\/p>\n
The Public Prosecutor's Office - and the end of ex officio referrals<\/h3>\n The public prosecutor can refer a case to the court when it is in the public interest to do so - in the case of obvious fraud or a debtor who refuses to declare his situation despite a proven cessation of payments. This power exists but is rarely used in practice.<\/p>\n
An important legislative change: since the Act of 20 November 2023, the court may no longer take jurisdiction of its own motion to open collective proceedings (art. L. 640-3-1 Commercial Code). This abolition puts an end to a long-standing practice that raised questions of compatibility with the right to a fair trial guaranteed by Article 6 of the European Convention on Human Rights.<\/p>\n
The immediate effects of the opening judgment<\/h2>\nRelinquishing control of the executive<\/h3>\n The most immediate and radical effect of judicial liquidation is the divestiture<\/strong> of the manager. From the time of the opening judgment, he loses the power to administer and dispose of his assets, both present and future (art. L. 641-9 Commercial Code). The liquidator alone exercises all the debtor's rights and actions in respect of his assets.<\/p>\nActs performed by the director after the judgment in breach of this divestiture are not null and void - they cannot be set up against the insolvency proceedings. The nuance is legally significant: the act exists between the parties, but the insolvency proceedings may ignore it. The Court of Cassation applies this rule without leniency, including to payment orders or bank transfers ordered by the director after the opening judgment (Cass. com., 30 June 2021, no. 20-18.759).<\/p>\n
This does not mean that the executive is stripped of all power. He retains his own rights<\/strong> - those that the liquidator cannot exercise in his place: instituting civil proceedings, acting on the status of persons, exercising remedies against decisions of the collective proceedings, accepting or renouncing a succession.<\/p>\nThe cessation of activity and temporary maintenance<\/h3>\n In principle, when a company is declared bankrupt, it ceases trading immediately. Exceptionally, the court may authorise a temporary business continuity<\/strong> for a maximum of three months, renewable once (art. L. 641-10 Commercial Code). The stay is ordered when it is in the public interest or the interest of creditors to do so - typically to enable a going concern to be sold, which preserves the value of assets and jobs better than the isolated sale of equipment.<\/p>\nDuring this period, claims that have regularly arisen in connection with the continuation of the business benefit from the privilege of subsequent creditors (art. L. 641-13). This privilege is important: it allows suppliers to supply the company without taking an excessive risk.<\/p>\n
The suspect period and nullities<\/h3>\n The opening judgment sets the date of cessation of payments<\/strong>, which can go back up to 18 months. The interval between this date and the judgment is known as the suspect period. During this period, certain acts of the debtor may be cancelled by the liquidator in order to reconstitute the assets.<\/p>\nArticle L. 632-1 of the French Commercial Code lists the legal nullities: payment of debts not yet due, provision of security for prior debts, gratuitous deeds, etc. Article L. 632-2 provides for optional nullities in respect of acts for valuable consideration entered into with knowledge of the cessation of payments. The liquidator can use these actions to maximise realisable assets.<\/p>\n
\n
\n
1<\/div>\n
\n
Judgment opening the judicial liquidation<\/strong>The court finds that payments have ceased and that recovery is impossible. Appointment of liquidator and official receiver. Fixing of the date of cessation of payments.<\/span>\n <\/div>\n<\/p><\/div>\n\n
2<\/div>\n
\n
Publication in the BODACC - 2 months to declare claims<\/strong>Once the judgment has been published, creditors have 2 months to declare their claims to the judicial representative (4 months for foreign creditors). Foreclosure period: once this period has elapsed, the claim can no longer be admitted.<\/span>\n <\/div>\n<\/p><\/div>\n\n
3<\/div>\n
\n
Divestment and takeover by the liquidator<\/strong>The liquidator takes possession of the company, its premises, bank accounts and documents. The director no longer has any powers of disposal or administration.<\/span>\n <\/div>\n<\/p><\/div>\n\n
4<\/div>\n
\n
Dismissal of employees within 15 days<\/strong>The liquidator dismisses all employees within the statutory 15-day period following the opening judgment. The AGS guarantees payment of employee claims.<\/span>\n <\/div>\n<\/p><\/div>\n\n
5<\/div>\n
\n
Inventory of assets<\/strong>The liquidator draws up an inventory of all the assets (stocks, equipment, buildings, trade receivables, intangible rights). This inventory determines the amount to be realised.<\/span>\n <\/div>\n<\/p><\/div>\n\n
6<\/div>\n
\n
Verification of declared claims<\/strong>The official receiver verifies the claims declared and rules on their admission. Disputed creditors may refer the matter to the court.<\/span>\n <\/div>\n<\/p><\/div>\n\n
7<\/div>\n
\n
Realisation of assets<\/strong>Sale of the business or its individual assets (buildings, equipment, inventories, receivables). Sales are made by auction or by mutual agreement, with the authorisation of the juge-commissaire.<\/span>\n <\/div>\n<\/p><\/div>\n\n
8<\/div>\n
\n
Distribution among creditors and closure judgment<\/strong>The liquidator distributes the proceeds of sales according to the legal order. The court pronounces the closing judgement - for lack of assets in almost all cases.<\/span>\n <\/div>\n<\/p><\/div>\n<\/p><\/div>\nThe fate of employees<\/h2>\nDismissal within 15 days<\/h3>\n The opening of a judicial liquidation triggers the dismissal of all employees. The liquidator must carry out the redundancies within a 15 days' notice<\/strong> from the opening judgment (art. L. 641-4 Commercial Code). This time limit is imperative: it is designed to trigger the AGS's payment of compensation quickly (see below) and to enable employees to start their dealings with P\u00f4le emploi as soon as possible.<\/p>\nRedundancies for economic reasons in the context of compulsory liquidation do not require a job protection plan, even when the company has more than fifty employees and the redundancies exceed ten: compulsory liquidation entails the application of a simplified system, justified by the very impossibility of safeguarding jobs. Staff representatives are consulted, but the procedure is streamlined.<\/p>\n
AGS: who pays wages when the company can no longer do so?<\/h3>\n The AGS - Association pour la gestion du r\u00e9gime de Garantie des cr\u00e9ances des Salari\u00e9s - is the safety net for employees in the event of employer default. It guarantees payment of outstanding employee claims: wages, holiday pay, notice periods, redundancy payments, within the legal limits.<\/p>\n
The AGS intervenes at the request of the judicial representative. It advances the necessary funds, then takes action against the insolvency proceedings as a preferred creditor. For the employee, the guarantee is almost total: unless the legal ceilings are exceeded (which only apply to high salaries), his claims are paid even if the company's assets are nil.<\/p>\n
Salary superprivilege in the distribution chain<\/h3>\n In the order of payment of creditors, employees benefit from a superprivilege<\/strong> for the last sixty days' salary prior to the opening judgment. This superprivilege takes precedence over all other claims, including legal costs and secured creditors. This mechanism ensures that the last unpaid wages before the bankruptcy are the first to be paid out of the realised assets.<\/p>\nRealisation of assets and payment of creditors<\/h2>\nGlobal disposal or sale of individual assets<\/h3>\n The liquidator proceeds with the sale of all the debtor's assets. There are two main methods. The global disposal of the company<\/strong> (or a branch of business) enables the business to be passed on to a buyer who will maintain some of the jobs. It preserves the value of the business - a going concern is worth infinitely more than the sum of the equipment sold off. The disposal of isolated assets<\/strong> is the default mode when no overall takeover offer is made: buildings sold at auction, equipment liquidated, stocks sold off.<\/p>\nThe juge-commissaire authorises sales and sets the terms and conditions. The liquidator is required to report on his management. The liquidator may also bring actions for the annulment of acts performed during the suspect period in order to reconstitute the assets.<\/p>\n
Declaration of claims: mandatory time limit for foreclosure<\/h3>\n All creditors prior to the opening judgment must declare their claims to the judicial representative within a period of two-month period<\/strong> from publication of the judgment in the BODACC (four months for creditors established outside France). Once this period has elapsed, the claim can no longer be recognised and the creditor loses his right to be paid out of the assets realised. The rule is strict, with few exceptions (creditors not informed despite their diligence).<\/p>\n\nDeadline alert - Creditors: take action within 2 months<\/p>\n
If you do not declare your claim within 2 months of publication in the BODACC, you lose all rights to payment from your assets. This period applies to everyone: suppliers, banks, landlords, URSSAF and tax authorities. No reminders are sent.<\/p>\n<\/aside>\n
The legal order of payment of creditors<\/h3>\n The proceeds of sales are distributed according to the legal order set out in article L. 643-8 of the French Commercial Code, which refers to the liens and security interests set out in the Civil Code and the French Commercial Code. The hierarchy is dense. In practice, the main layers are as follows:<\/p>\n
\n
\n\n\nRank<\/th>\n Creditors<\/th>\n Legal basis<\/th>\n<\/tr>\n<\/thead>\n \n\n1<\/td>\n Employee superprivilege (last 60 days' pay)<\/td>\n Art. L. 3253-2 Labour Code<\/td>\n<\/tr>\n \n2<\/td>\n Legal costs of insolvency proceedings<\/td>\n Art. L. 641-13<\/td>\n<\/tr>\n \n3<\/td>\n Subsequent preferential creditors (arising while the business is being maintained)<\/td>\n Art. L. 641-13<\/td>\n<\/tr>\n \n4<\/td>\n Treasury and social security bodies (tax and social security privileges)<\/td>\n Art. 1920 et seq. CGI, art. L. 243-4 CSS<\/td>\n<\/tr>\n \n5<\/td>\n Creditors with security interests (mortgages, pledges, liens)<\/td>\n Depending on the rank and nature of the security<\/td>\n<\/tr>\n \n6<\/td>\n Unsecured creditors<\/td>\n Breakdown by the pound<\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\nThe statistical reality is stark: in the vast majority of compulsory liquidations, the assets realised do not even cover all the preferential claims. Unsecured creditors - unsecured suppliers, unsecured bondholders - generally receive nothing.<\/p>\n
How a compulsory liquidation ends<\/h2>\nClosure for lack of assets: fate of residual debts<\/h3>\n This is the most common situation. When there are insufficient assets to pay off all the creditors - which is the case in almost all liquidations - the court orders the company to be wound up. closure for insufficiency of assets<\/strong> (art. L. 643-9 Commercial Code).<\/p>\nThe effect of this closure is essential and little known: it puts an end to individual creditors' proceedings against the debtor. For a company<\/strong>, The consequence is the dissolution of the legal entity: the entity disappears and the debts with it - creditors no longer have any recourse. For a natural person<\/strong> (sole proprietor, manager of a partnership that has guaranteed the debts), the rule is the same: after the closure due to insufficient assets, creditors do not recover their individual right of action (art. L. 643-11 Commercial Code). The debts remain legally valid, but are unenforceable - except in the case of fraud, criminal conviction, or in the case of guarantors (Cass. com., 19 April 2023, no. 21-19.563).<\/p>\nIt is this mechanism that the Anglo-Saxons call \u00abdischarge\u00bb - the wiping out of residual debts - and which constitutes one of the foundations of the entrepreneur's right to bounce back.<\/p>\n
Closing to extinguish liabilities<\/h3>\n The favourable hypothesis - a rare one - is closure to extinguish liabilities<\/strong> the assets realised are sufficient to pay off all creditors. The debtor regains full legal and commercial capacity. This scenario exists, in particular, when a guarantee or insurance has covered most of the debts, or when the value of the real estate assets was underestimated.<\/p>\nReopening proceedings<\/h3>\n The proceedings may be reopened after closure in two circumstances: the discovery of an asset that was not realised during the first proceedings (a forgotten bank account, a claim on a third party) or the conviction of the debtor for fraud. Reopening is rare and requires strict conditions.<\/p>\n
Simplified judicial liquidation<\/h2>\n In addition to the ordinary liquidation procedure, the French Commercial Code provides for a simplified liquidation procedure, the aim of which is to ensure speedy liquidation. It applies to small businesses whose assets are easy to realise. There are two variants.<\/p>\n\nThresholds - Art. L. 644-1 Commercial Code<\/p>\n
LJS mandatory :<\/strong> the debtor does not own any property, employs no more than 1 employee and has a turnover excluding VAT of no more than \u20ac300,000. Closing date: 6 months maximum.<\/p>\nOptional LJS :<\/strong> the debtor does not own any property, employs between 2 and 5 people and has net sales of \u20ac750,000 or less. Closing date: 12 months maximum.<\/p>\n<\/aside>\nUnder the LJS, the procedure is simplified: the verification of claims only concerns employee claims and those likely to rank higher in the distribution. Securities are sold by auction or by mutual agreement under simplified conditions. The official receiver has extensive powers to speed up the process.<\/p>\n
The practical implications are real: an LJS completed in 6 months enables the manager to bounce back much more quickly than a liquidation under ordinary law, which can take several years. The thresholds need to be checked carefully - in particular, the requirement that the business has no real estate assets, which excludes many craft businesses.<\/p>\n
Consequences for the manager<\/h2>\nSole traders: protection of personal assets since 2022<\/h3>\n The law of 14 February 2022 to promote self-employed professional activity introduced automatic and automatic separation of the assets of sole traders: business assets and personal assets. This reform profoundly changes the scope of judicial liquidation for sole traders.<\/p>\n
Since this law, the judicial liquidation of an individual entrepreneur only concerns his business assets<\/strong>. The business owner's personal assets - principal residence, personal savings, vehicle not used in the business - are in principle beyond the reach of professional creditors. On the other hand, creditors who existed before the company was set up, or whose claim arose in a non-business capacity, are still authorised to sue against the personal assets.<\/p>\nThis is a major reform. It brings the regime for sole traders closer to that for SARL managers, for whom the separation of assets already existed via the legal entity mechanism - except in the case of personal commitments or guarantees.<\/p>\n
Liability for insufficient assets<\/h3>\n When the liquidation reveals that the assets are insufficient to cover the liabilities, the liquidator may - under certain conditions - initiate a liquidation. liability action for insufficient assets<\/strong> against de jure or de facto managers (art. L. 651-2 Commercial Code).<\/p>\nSince the Sapin 2 Act of 2016, simple negligence is no longer sufficient. The management error must have contributed to the shortfall in assets, and it must be \u00abcharacterised\u00bb. Examples of misconduct accepted by the courts: culpable delay in declaring the cessation of payments beyond the legal deadline of 45 days, abusive pursuit of a loss-making activity, misappropriation of funds for the benefit of the director, absent or irregular accounting, abusive support for third-party entities in an irremediably compromised situation. If misconduct is established, the court may order the director to make good all or part of the shortfall in assets.<\/p>\n
Professional sanctions: personal bankruptcy and management ban<\/h3>\n In addition to pecuniary liability, the director may be subject to professional sanctions<\/strong> ordered by the court. Personal bankruptcy (art. L. 653-1 Commercial Code) entails an inability to carry on a trade or craft, or to manage or administer a business. A ban on managing a business (art. L. 653-8) has similar effects, but is limited to certain functions. These two sanctions may be imposed for a maximum of fifteen years.<\/p>\nThe most serious misconduct - misappropriation of assets, fictitious accounting, fraudulent increase in liabilities - may also constitute the offence of bankruptcy<\/strong> (art. L. 654-1 Commercial Code), punishable by five years' imprisonment and a fine of \u20ac75,000. Additional penalties include disqualification from managing the business and loss of civic rights.<\/p>\n\n\n
Frequently asked questions<\/h2>\n\nWhat is the difference between compulsory liquidation and bankruptcy?<\/summary>\nBankruptcy\u00ab has not existed in French law since 1985. In the past, the term was used to describe the infamous personal status of a failing trader. Today, the law distinguishes between three types of collective procedure: safeguard (before cessation of payments), legal redress (cessation of payments + possible recovery) and legal liquidation (cessation of payments + impossible recovery). The word \u00bbbankruptcy\u00ab is a common but technically inaccurate shorthand.<\/p>\n<\/details>\n\nWho pays the debts in the event of compulsory liquidation?<\/summary>\nThe company itself pays the debts it can settle, using the proceeds from the sale of its assets. Creditors are paid in a strict legal order, with privileged creditors (employees, tax authorities, security holders) first and unsecured creditors last. Where there are insufficient assets to pay for everything - which is the case in the vast majority of procedures - unsecured creditors receive nothing. Closure due to insufficient assets extinguishes the proceedings: the remaining debts are unenforceable.<\/p>\n<\/details>\n\nAre debts written off after a compulsory liquidation?<\/summary>\nFor a company, yes: closure results in the dissolution of the legal entity and the debts disappear with it. For an individual (sole trader or manager who has guaranteed the company's debts), the rule is identical for the debts covered by the procedure: after closure due to insufficient assets, professional creditors can no longer pursue the debtor. Exceptions: proven fraud, criminal debts (fines, confiscations), maintenance debts, and subrogated claims by guarantors against the principal debtor.<\/p>\n<\/details>\n\nHow long does a compulsory liquidation last?<\/summary>\nThe compulsory simplified judicial liquidation (no more than 1 employee, turnover \u2264 \u20ac300,000, no real estate) must be completed within 6 months. Optional LJS (2-5 employees, turnover \u2264 \u20ac750,000) within 12 months. There is no legal maximum duration for the ordinary procedure: it depends on the complexity of the case, the number of creditors, ongoing disputes and the assets to be realised. The court sets a provisional deadline in the opening judgment, which may be extended. In practice, complex liquidations often last 3 to 7 years.<\/p>\n<\/details>\n\nIs it possible to resume a business after a compulsory liquidation?<\/summary>\nYes, unless the director has been banned from managing the business or declared personally bankrupt by the court. If there is no sanction, the closure of the judicial liquidation allows the entrepreneur to start again. For sole traders, the Law of 2022 even provides an explicit right to rebound: the personal assets preserved during the liquidation can be used as a basis for a new activity. The only practical obstacle is access to credit, which will remain difficult for several years.<\/p>\n<\/details>\n\nWhat is the point of filing for bankruptcy when you know your assets are insufficient?<\/summary>\nThere are several reasons for this. Firstly, filing for bankruptcy within 45 days of the cessation of payments protects the director against liability for insufficient assets: it is the failure to act in time that constitutes a fault. Secondly, the closure of the business due to insufficient assets clears the debts: the director will no longer be pursued by his professional creditors. Lastly, the opening of the proceedings halts immediate individual proceedings (seizures, writs of execution) and suspends the accrual of interest. For employees, the declaration triggers the AGS guarantee.<\/p>\n<\/details>\n\nCan the director contest the decision to open the liquidation?<\/summary>\nYes, the opening judgment is provisionally enforceable by operation of law (art. R. 661-1 Commercial Code) - it takes effect immediately, even if an appeal is lodged. The appeal period is 10 days from the date of notification. Third-party proceedings are open to persons who were not party to the proceedings initiating the proceedings. An appeal to the Supreme Court remains possible under the conditions of ordinary law. In practice, appeals against opening judgments rarely result in a reversal: the Court of Appeal verifies the legal conditions, but does not repeat the court's economic assessment.<\/p>\n<\/details><\/div>\n<\/section>","protected":false},"excerpt":{"rendered":"
Ce que la liquidation judiciaire n’est pas \u2014 et ce qu’elle est La liquidation judiciaire est souvent d\u00e9sign\u00e9e sous le terme \u00ab faillite \u00bb. La confusion est compr\u00e9hensible, mais juridiquement inexacte. La faillite d\u00e9signait autrefois un statut personnel infamant attach\u00e9 au commer\u00e7ant d\u00e9faillant ; depuis la loi du 25 janvier 1985, ce terme a disparu […]<\/p>\n","protected":false},"author":0,"featured_media":0,"parent":18292,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"page-templates\/template-guide-enfant.php","meta":{"footnotes":""},"solent_domaine":[452,413],"class_list":["post-18398","page","type-page","status-publish","hentry"],"_links":{"self":[{"href":"https:\/\/solent-avocats.com\/en\/wp-json\/wp\/v2\/pages\/18398","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/solent-avocats.com\/en\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/solent-avocats.com\/en\/wp-json\/wp\/v2\/types\/page"}],"replies":[{"embeddable":true,"href":"https:\/\/solent-avocats.com\/en\/wp-json\/wp\/v2\/comments?post=18398"}],"version-history":[{"count":1,"href":"https:\/\/solent-avocats.com\/en\/wp-json\/wp\/v2\/pages\/18398\/revisions"}],"predecessor-version":[{"id":18399,"href":"https:\/\/solent-avocats.com\/en\/wp-json\/wp\/v2\/pages\/18398\/revisions\/18399"}],"up":[{"embeddable":true,"href":"https:\/\/solent-avocats.com\/en\/wp-json\/wp\/v2\/pages\/18292"}],"wp:attachment":[{"href":"https:\/\/solent-avocats.com\/en\/wp-json\/wp\/v2\/media?parent=18398"}],"wp:term":[{"taxonomy":"solent_domaine","embeddable":true,"href":"https:\/\/solent-avocats.com\/en\/wp-json\/wp\/v2\/solent_domaine?post=18398"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}